Return of US govt renews nerves over Fed’s rate track
Retirement Commission asks politicians to come together.
Stocks on Wall Street and in Europe tumbled as the reopening of the US federal government revived nervousness about the Federal Reserve’s interest rate path.
The tech-heavy Nasdaq Composite felt the shift in tone most keenly, with majors Nvidia and Tesla the hardest hit among the Magnificent 7, and Sharesies’ favourite Rocket Lab sliding to a six-week low, while Bitcoin dropped below US$100,000.
Walt Disney Co led the Dow Jones Industrial Average lower after the media conglomerate’s earnings fell short of expectations with analysts unimpressed by growth in its streaming and experiences arms, while Cisco Systems managed to scale new heights for the first time in 25 years after raising its earnings outlook.
And the Retirement Commission has released its three-yearly review of superannuation settings, urging political parties of various hues to come together and reach a long-term accord on retirement policy.
Red light
Stock markets on both sides of the Atlantic tumbled as US President Donald Trump signed a stopgap funding measure to reopen the federal government after its seven-week shutdown, with cooling expectations for the Federal Reserve to cut interest rates as investors prepare for official economic data to start coming out again.
The S&P 500 was down 1.3% in late trading, while the UK’s FTSE 100 index dropped 1.1%, Germany’s DAX 30 fell 1.4% and France’s CAC 40 dipped 0.1%.
“US equities show a decent fall, likely a combination of fear of what the economic data will reveal and ongoing angst about valuations in the tech sector,” Bank of New Zealand senior markets strategist Jason Wong said in a note. “Weaker equities also reflect a paring of Fed easing expectations, with the Fed now seen slightly more likely than not to keep interest rates steady in December, with only 12 basis points priced.”
The tech-heavy Nasdaq Composite slumped 2.1% in late trading, with Nvidia falling 4.1% and Tesla sinking 7.1% as investors remain unnerved by lofty valuations underpinned by the artificial intelligence boom. Local favourite Rocket Lab sank 9% in late trading.
Wall Street’s fear gauge, the volatility index, spiked 11%, while Bitcoin dropped 1.9% to US$99,604.
House of Mouse
The blue chip Dow Jones Industrial Average fell 1%, led by an 8% slide for Walt Disney Co after the media conglomerate’s quarterly earnings disappointed investors, with growth in its streaming and experiences units failing to make up for its soft television and movie arms.
That unease wasn’t universal as Cisco Systems jumped 4.2%, breaking into new territory for the first time in 25 years after raising its earnings outlook, driven in part by network products backed by AI-related demand.
The antipodes are bracing for a soft end to the week, with Australian futures pointing to a 1.2% decline for the S&P/ASX 200 index when trading opens across the Tasman and New Zealand’s S&P/NZX50 index on track to snap three weekly gains.
The kiwi dollar rose to 56.73 US cents at 7am in Auckland from 56.56 cents yesterday, with BNZ’s performance of manufacturing index due for release today.
Mānuka honey products maker Comvita is holding its special meeting in Auckland today, where shareholders will decide on whether to accept an 80 cents per share takeover offer from Mark Stewart’s Florenz unit. Early voting indicates the scheme will fail unless votes already cast against the proposal change their mind.
And the Retirement Commission’s three-yearly retirement policy review is urging politicians to reach a cross-party long-term accord to avoid piecemeal policy change and provide certainty for future generations.
The agency made a series of recommendations to address short-term pressures, such as raising the government contribution for low-income KiwiSaver members and banning total remuneration employment contracts.
